Deck 5: Business and Economic Forecasting

Question 1

The type of economic indicator that can best be used for business forecasting is the:

A)leading indicator
B)coincident indicator
C)lagging indicator
D)current business inventory indicator
E)optimism/pessimism indicator

Answer 1

A

Question 2

Seasonal variations can be incorporated into a time-series model in a number of different ways,including:

A)ratio-to-trend method
B)use of dummy variables
C)root mean squared error method
D)a and b only
E)a,b,and c

Answer 2

D

Question 3

The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as:

A)secular trend
B)cyclical variation
C)seasonal effect
D)unpredictable random factor
E)none of the above

Answer 3

B

Question 4

Consumer expenditure plans is an example of a forecasting method.Which of the general categories best described this example?

A)time-series forecasting techniques
B)barometric techniques
C)survey techniques and opinion polling
D)econometric techniques
E)input-output analysis

Question 5

An example of a time series data set is one for which the:

A)data would be collected for a given firm for several consecutive periods (e.g. ,months).
B)data would be collected for several different firms at a single point in time.
C)regression analysis comes from data randomly taken from different points in time.
D)data is created from a random number generation program.
D)use of regression analysis would impossible in time series.

Question 6

Which of the following $\underline{\text{ barometric indicators }}$ would be the most helpful for forecasting future sales for an industry?

A)lagging economic indicators.
B)leading economic indicators.
C)coincident economic indicators.
D)wishful thinking
E)none of the above

Question 7

For studying demand relationships for a proposed new product that no one has ever used before,what would be the best method to use?

A)ordinary least squares regression on historical data
B)market experiments,where the price is set differently in two markets
C)consumer surveys,where potential customers hear about the product and are asked their opinions
D)double log functional form regression model
E)all of the above are equally useful in this case

Question 8

In the first-order exponential smoothing model,the new forecast is equal to a weighted average of the old forecast and the actual value in the most recent period.

Question 9

Select the $\textbf{ correct }$ statement.

A)Qualitative forecasts give the direction of change.
B)Quantitative forecasts give the exact amount or exact percentage change.
C)Diffusion forecasts use the proportion of the forecasts that are positive to forecast up or down.
D)Surveys are a form of qualitative forecasting.
E)all of the above are correct.

Question 10

Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast.

A)opinion polling
B)barometric forecasting
C)econometric forecasting
D)time-series forecasting
E)none of the above

Question 11

Mr.Geppetto uses exponential smoothing to predict revenue in his wood carving business.He uses a weight of $\omega$ = .4 for the naïve forecast and (1- $\omega$ )= .6 for the past forecast.What revenue did he predict for March using the data below? Select closet answer.

A)106.2
B)104.7
C)103.2
D)102.1
E)101.7

Question 12

The Accuweather Corporation manufactures barometers and thermometers for weather forecasters.In an attempt to forecast its future needs for mercury,Accuweather's chief economist estimated average monthly mercury needs as:
N = 500 + 10X
where N = monthly mercury needs (units)and X = time period in months (January 2008= 0).The following monthly seasonal adjustment factors have been estimated using data from the past five years:
(a) Forecast Accuweather's mercury needs for January, April, July, September, and December of 2010.
(b) The following actual and forecast values of mercury needs in the month of November have been recorded:

What seasonal adjustment factor should the firm use for November?

Question 13

The forecasting technique which attempts to forecast short-run changes and makes use of economic indicators known as leading,coincident or lagging indicators is known as:

A)econometric technique
B)time-series forecasting
C)opinion polling
D)barometric technique
E)judgment forecasting

Question 14

If two alternative economic models are offered,other things equal,we would

A)tend to pick the one with the lowest R^2.
B)select the model that is the most expensive to estimate.
C)pick the model that was the most complex.
D)select the model that gave the most accurate forecasts
E)all of the above

Question 15

Variations in a time-series forecast can be caused by:

A)cyclical variations
B)secular trends
C)seasonal effects
D)a and b only
E)a,b,and c

Question 16

Time-series forecasting models:

A)are useful whenever changes occur rapidly and wildly
B)are more effective in making long-run forecasts than short-run forecasts
C)are based solely on historical observations of the values of the variable being forecasted
D)attempt to explain the underlying causal relationships which produce the observed outcome
E)none of the above

Question 17

Simplified trend models are generally appropriate for predicting the turning points in an economic time series.

Question 18

Milner Brewing Company experienced the following monthly sales (in thousands of barrels)during 2010:

(a) Develop 2-month moving average forecasts for March through July.
(b) Develop 4-month moving average forecasts for May through July.
(c) Develop forecasts for February through July using the exponential smoothing method (with w = .5). Begin by assuming
Y_t+1 = Y_t

Question 19

The use of quarterly data to develop the forecasting model Y_t = a +bY_t-1 is an example of which forecasting technique?

A)Barometric forecasting
B)Time-series forecasting
C)Survey and opinion
D)Econometric methods based on an understanding of the underlying economic variables involved
E)Input-output analysis